The crude oil market in July was very eventful. The controversy raised by the United Arab Emirates at the OPEC+ meeting once caused market uneasiness. Although in the end, a new production increase resolution was reached without any risk. , resolving the risk of supply-side talks collapsing again, but closing a huge cross star on the monthly K-line, which also shows that funds have experienced violent fluctuations in their predictions of the oil price outlook at the current position.
In early July, crude oil prices quickly peaked and continued to decline. Finally, in July On the 19th, macro market sentiment combined with the weakness of crude oil prices caused crude oil prices to fall sharply, and the market was filled with extreme panic. But then the sentiment in the financial market began to stabilize, and the macro market trend began to slowly return to rationality. Crude oil prices subsequently rose sharply, recovering most of the room for decline. In the end, crude oil prices almost ended flat in July. Although the closing price did not change significantly from the beginning of the month to the end of the month, the process in the middle was extremely intense.
The epidemic is the most important factor affecting the decline in oil prices. Now we are all aware of the spread ability of the Delta strain. Countries with extremely strong defense capabilities like China are not immune. With the outbreak of the Nanjing epidemic As the epidemic continues to ferment, the new crown epidemic has spread in many provinces in China, which is enough to show that the current pressure for epidemic prevention and control is still huge. This is true for China, let alone other countries. The number of new confirmed cases of COVID-19 around the world is showing signs of rising. The number of new confirmed cases in Japan, which is hosting the Olympics, has also increased significantly. Some regions, including Southeast Asia and Europe, have re-implemented blockade policies, which has a greater impact on the demand side.
Of course, the substantial impact of the epidemic on the demand side is not enough to cause crude oil prices to rise. The emotional impact of such a big fluctuation is the most fatal. Emotional fluctuations not only affect crude oil prices, but also affect financial markets and macro market trends, thereby pushing crude oil prices further downward. This is also the main reason why crude oil prices fell sharply in July.
In addition, the relative price of crude oil The high level has also put a certain amount of pressure on the market. As far as the current market is concerned, the positive effects that the supply side has been able to provide have basically been reflected, and the future market will most likely follow the path of continuous supply recovery. Of course, this includes not only the recovery of OPEC+ supply, but also the recovery of shale oil production. Therefore, the supply side seems to be no longer able to provide significant upward momentum for prices.
In this case, if crude oil prices want to continue to rise, they must rely on macro factors and Demand-side push. From the perspective of macro factors, expectations of the Federal Reserve raising interest rates and tightening liquidity are getting stronger and stronger. If the macro market does not provide negative factors for crude oil prices, it is already a relatively good market environment. Therefore, it seems that bulls cannot fully count on macro factors to push crude oil prices upward significantly. However, we have recently discovered that the correlation between crude oil prices and the trend of U.S. stocks is extremely high. In July, U.S. stocks hit a new all-time high. We cannot rule out that the continued rise in U.S. stocks will drive crude oil prices slightly higher, but this will not be enough to support a sharp rise in oil prices. In this case, if crude oil prices want to rise significantly, it depends on whether the demand side can be strong. Judging from the current market situation, the demand side does not seem to be able to provide many bullish factors, and the troubles caused by the epidemic have always been a hurdle that bulls cannot overcome.
Oil prices fluctuated sharply after the OPEC+ meeting
From the current fundamentals, OPEC+ decided to increase production by only 400,000 barrels per day in August. This has supported crude oil prices. Although there are certain disturbances due to the epidemic, the demand base is still larger than the supply side. In addition, we still have not seen a significant increase in U.S. crude oil production, which further confirms that the fundamentals in August will continue to maintain a relatively tight supply situation. Therefore, in the absence of macro disturbances, crude oil prices are expected to still oscillate strongly in August. Despite this, we still cannot ignore the disturbances in the macro market. From the sharp fluctuations in crude oil prices in July, we can see the huge impact of the macro market on oil prices.
The more interesting thing in July is that the OPEC+ meeting was triggered by the sudden change in the UAE There was a temporary interruption. Under this situation, the market felt a bit of panic. Investors were worried about whether OPEC+ would fall apart because of this matter, which would eventually lead to the end of the production reduction meeting. This would be a fatal blow to crude oil prices. During several subsequent meetings, the United Arab Emirates never relented, and Saudi Arabia also acted extremely tough. The crisis seemed to be lingering on the crude oil market. Seeing this, bulls closed their positions and left the market, causing crude oil prices to show signs of decline after rising. Weak form.
On July 18, OPEC+ finally reached an agreement to reduce production. Saudi Arabia agreed to the UAE to increase the base of production reduction, but the increase will be next year. OPEC+ still insists on increasing crude oil production by only 400,000 barrels per day in August, which is a relatively big plus for the supply side. After all, with the current recovery of demand, only increasing production by 100,000 barrels per day is not enough. offset the increase in demand. Therefore, the market expected that crude oil prices might rise when they opened on July 19, and optimistic expectations once again lingered in the crude oil market.
But when the market actually opened on July 19, the market trend was not as good as As bulls expected, the price maintained a slight oscillation after the opening. In the second half of the Asian session and the opening of the European session, crude oil prices began to show a weak form. After the US session, the market fell sharply, and finally closed a very long negative line. . The efforts of the bulls for a month and a half were all wiped out in one day. Of course, the sharp drop in crude oil prices was not because OPEC increased crude oil production, but because the macro market experienced great fluctuations that night. Not only did crude oil prices fall sharply, but even U.S. stocks also gapped and opened lower. In addition, the sharp fluctuations in the U.S. dollar index, the sharp rise in U.S. bond yields, and the sharp rise in the volatility index all show the extreme instability of the macro market.
However, crude oil prices gradually stabilized and the price only fell sharply for one day. . Subsequently, on July 21, macroeconomic sentiment began to stabilize, risk appetite returned again, and crude oil prices closed another large positive line that day. This large fluctuation in the market has also made both long and short parties feel overwhelmed. Judging from the position data, fund net long positions have also been significantly liquidated to avoid market uncertainty. Judging from this month’s market trends, although we believe that there are no major problems with the current fundamentals, macro disturbances are enough to cause market volatility to increase significantly. Judging from the market reaction on the day when crude oil prices plummeted, there did not seem to be an obvious precursor. For this kind of market situation that is difficult to grasp, we still need to be cautious in future transactions.
The US market is still important
The performance of the U.S. market will also have a huge impact on future oil prices. Judging from the current U.S. data Look, U.S. refining inputs are already near seasonal highs and will remain at those highs. From another perspective, we can also understand that the incremental demand in the US market may have been limited. While the supply side continues to grow, if it is difficult to find more effective increases on the demand side, the tight supply situation will gradually ease, which is not good news for bulls.
Judging from recent U.S. inventory data, crude oil inventories and refined oil inventories are increasing The continuous decline is an important manifestation of the improvement in demand for U.S. refined oil products. From a seasonal perspective, crude oil inventories and refined oil inventories continue to decline, which is good news for bulls. This also means that as long as there are no major risks in the macro market, the inventory side will likely The relative strength of crude oil prices continues to be supported.
In addition, U.S. crude oil production unexpectedly dropped by 200,000 barrels last week. There seems to be no significant increase in crude oil production in July. However, as crude oil prices continue to rise, it is not ruled out that there will be signs of recovery in U.S. shale oil. Shale oil production fell by 200,000 barrels per day last week. This was mainly due to seasonal maintenance in Alaska, not a decline in domestic shale oil production in the United States. This means that U.S. crude oil production is still likely to continue to recover in the future. . We all know that the cost of shale oil in the United States is around US$35 per barrel. The current oil price has allowed producers to make a lot of money, and shale oil production is increasing rapidly. If U.S. shale oil companies are determined to increase production, they can significantly increase production in a very short period of time. This is the most uncontrollable factor on the supply side and requires close attention.
In addition, policy factors in the U.S. market will also determine the future trend of crude oil prices. While U.S. inflation continues to rise, expectations for the Federal Reserve to tighten monetary policy have become stronger. If the Federal Reserve releases hawkish expectations, the U.S. dollar index will have a certain negative effect on oil prices. This is the most uncertain macro market at present. the elements of.
Taken together, the crude oil market will continue to remain relatively strong in the third quarter. However, as prices hover at high levels and the supply side continues to recover, as well as the expectations of the epidemic and the Federal Reserve’s tightening of currency, crude oil prices in the fourth quarter may There will be certain risks. Therefore, the crude oil market trading difficulty in the second half of the year may be significantly higher than that in the first half of the year, and attention should be paid to risk control during daily transactions.
With the expectation that the reserve will tighten currency, crude oil prices may face certain risks in the fourth quarter. Therefore, the crude oil market trading difficulty in the second half of the year may be significantly higher than that in the first half of the year, and attention should be paid to risk control during daily transactions.
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